LOS ANGELES (May 6) – With the depletion of available distressed homes on the market over the past two years, more investors are shifting to investing in multifamily properties and away from single-family homes, according to a CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) survey of its members about their interactions with investors.

C.A.R.’s 2015 Investor Survey found 21 percent of investors purchased in multifamily properties in the past year, up from 19 percent in 2014 and 14 percent in 2013.

Eighty percent of the transactions were non-distressed, up from 70 percent in 2014, reflecting the recovering housing market. Additionally, consistent with investors purchasing more equity and multifamily properties, the median sales price increased to $375,000 in 2015, up from $320,000 in 2014 and $292,000 in 2013.

Investors also turned to higher-priced properties given a lack of inventory of lower-priced properties. Twenty-three percent of investment properties purchased ranged between $501,000 to $1 million, up from 16 percent in 2014, and 9 percent were above $1 million, up from 8 percent in 2014.

Among the reasons investors cited for buying now include good price (39 percent), followed closely by good location (38 percent), future development potential (9 percent), and size (7 percent).

Additional findings from C.A.R.’s “2015 Investor Survey” include:

• More investors (65 percent) rented their properties, rather than flip them (26 percent), up from 58 percent in 2014 but down from 73 percent in 2013.

• Investors held properties for a short period of time at an average of 6.1 years in 2015, down from 8 years in 2014, and 7.9 years in 2013.

• Investors also owned fewer properties on average in 2015 (6.4), down from 8.3 in 2014 and 6.5 in 2013.

• In a sign of optimism, the vast majority (70 percent) of investors believed their property would increase in value in one year, and three-fourths said the property would increase in value in five years.

• Investors expect the property to appreciate an average of 27 percent during their ownership period.

• Investors intend to charge a median monthly rent of $1,850 and plan to increase that by $50 (2.7 percent) next year.

C.A.R.’s “2015 California Investor Survey” was conducted in February and March 2015 in an effort to learn more about the role of investors in the California housing market. The online survey sampled random REALTORS® throughout California who had worked with investors within the 12 months prior to March 2015.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Spring home-buying season off to strong start in April with third straight monthly and annual home sales and price increases

LOS ANGELES (May 15) – California’s housing market accelerated in April as the spring home-buying season kicked off with both higher home sales and prices for the third straight month, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Home sales rose above the 400,000 mark in April for the first time since October 2013 to post the highest level since August 2013. Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 427,620 units in April, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide sales figure represents what would be the total number of homes sold during 2015 if sales maintained the April pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The April figure was 9.2 percent higher than the revised 391,440 homes sold in March. Home sales were up 9.3 percent from a revised 391,330 in April a year ago, and the increase was the highest year-over-year change since May 2012.

“It’s encouraging that the spring home-buying season is off to such a strong start,” said C.A.R. President Chris Kutzkey. “Sales activity is at the highest level in the last year and a half, and should remain solid throughout the rest of the season. We are finally seeing some of the pent-up housing demand that we talked about in the past turning into actual sales, thanks to solid job growth, record-low interest rates, and looser lending requirements.”

The median price of an existing, single-family detached California home increased in April from both the previous month and year for the third consecutive month. The median home price was up 2.8 percent from $468,550 in March to $481,760 in April, the highest level since November 2007. April’s median price was 7.4 percent higher than the revised $448,720 recorded in April 2014. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.

“While it’s a welcomed sign to see the growth in housing demand continue, the lack of supply remains a concern,” said C.A.R Vice President and Chief Economist Leslie Appleton-Young. “The imbalance between the two sides not only intensifies market competition and pushes home prices higher, but also leads to housing affordability issues that could ultimately lower the homeownership rate if the problem persists.”

• While both sales and active listings increased from the previous year, sales grew at a much faster pace than did active listings, contributing to a decline in available homes for sale. The Unsold Inventory Index fell from the 3.8 months reported in March to 3.5 months in April. The index, which indicates the number of months needed to sell the supply of homes on the market at the current sales rate, stood at 3.6 months in April 2014. A six- to seven-month supply is considered typical in a normal market.

• The median number of days it took to sell a single-family home also fell in April, down from 39 days in March to 34.2 days in April but was up from 33.9 days in April 2014.

• According to C.A.R.’s newest housing market indicator measuring sales-to-list price ratio*, properties are again generally selling below the list price, except in the San Francisco Bay Area, where a lack of homes for sale is pushing sales prices higher than original asking prices. The statewide measure suggests that homes are selling at a median of 98.8 percent of the list price, essentially flat compared to a ratio of 98.7 percent at the same time last year. The Bay Area is the only region where homes are selling above original list prices due to constrained supply with a ratio of 107.1 percent, up from 105.2 percent a year ago.

• The average California price per square foot** for an existing single-family home was $232 in April 2015, an increase of 4 percent from the previous month and an 8.4 percent increase from April 2014. Price per square foot at the state level has been showing an upward trend since early 2012, and has been rising on a year-over-year basis for 39 consecutive months. In recent months, however, the growth rate in price per square foot has slowed down as home prices level off. San Francisco County had the highest price per square foot in April at $793/sq. ft., followed by San Mateo ($735/sq. ft.), and Santa Clara ($569/sq. ft.). The three counties with the lowest price per square foot in April were Siskiyou ($99/sq. ft.), Glenn ($113/sq. ft.), and Merced ($114/sq. ft.).

• Mortgage rates fell in April, with the 30-year, fixed-mortgage interest rate averaging 3.67 percent, down from 3.77 percent in March and down from 4.34 percent in April 2014, according to Freddie Mac. Adjustable-mortgage interest rates were flat in April, averaging 2.46 percent, unchanged from March but up from 2.44 percent in April 2014.

Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. The median price is where half sold for more and half sold for less; medians are more typical than average prices, which are skewed by a relatively small share of transactions at either the lower-end or the upper-end. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. Due to the low sales volume in some areas, median price changes in April exhibit unusual fluctuation. The change in median prices should not be construed as actual price changes in specific homes.

*Sales-to-list price ratio is an indicator that reflects the negotiation power of home buyers and home sellers under current market conditions. The ratio is calculated by dividing the final sales price of a property by its last list price and is expressed as a percentage. A sales-to-list ratio with 100 percent or above suggests that the property sold for more than the list price, and a ratio below 100 percent indicates that the price sold below the asking price.

**Price per square foot is a measure commonly used by real estate agents and brokers to determine how much a square foot of space a buyer will pay for a property. It is calculated as the sale price of the home divided by the number of finished square feet. C.A.R. currently tracks price-per-square foot statistics for 33 counties.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

# # #

April 2015 County Sales and Price Activity
(Regional and condo sales data not seasonally adjusted)

April-15

Median Sold Price of Existing Single-Family Homes

Sales

State/Region/County

Apr-15

Mar-15

Apr-14

MTM% Chg

YTY% Chg

MTM% Chg

YTY% Chg

Calif. Single-family (SAAR)

$481,760

$468,550

$448,720

r

2.8%

7.4%

9.2%

9.3%

Calif. Condo/Townhome

$381,310

$382,050

$369,720

r

-0.2%

3.1%

11.9%

5.4%

Los Angeles Metro Area

$434,240

$431,660

$411,660

r

0.6%

5.5%

16.2%

9.6%

Inland Empire

$288,290

$290,240

$263,610

r

-0.7%

9.4%

11.7%

10.4%

San Francisco Bay Area

$844,810

$809,200

$772,110

r

4.4%

9.4%

23.0%

7.7%

San Francisco Bay Area

Alameda

$808,240

$756,250

$718,580

6.9%

12.5%

14.4%

4.2%

Contra-Costa (Ctl. Cty.)

$838,980

$784,950

$755,950

6.9%

11.0%

22.0%

0.7%

Marin

$1,208,330

$1,085,230

$1,007,580

11.3%

19.9%

21.3%

-5.9%

Napa

$617,650

$562,500

$523,150

9.8%

18.1%

-6.7%

-13.3%

San Francisco

$1,348,480

$1,275,000

$1,132,810

r

5.8%

19.0%

15.4%

1.9%

San Mateo

$1,280,000

$1,300,000

$1,001,000

-1.5%

27.9%

21.8%

-4.3%

Santa Clara

$960,000

$932,100

$900,500

r

3.0%

6.6%

31.0%

11.2%

Solano

$337,930

$345,100

$315,150

-2.1%

7.2%

23.3%

35.6%

Sonoma

$558,510

$519,500

$475,260

7.5%

17.5%

34.4%

23.3%

Southern California

Los Angeles

$426,580

$425,860

$406,750

0.2%

4.9%

18.3%

3.2%

Orange County

$705,190

$696,060

$679,820

1.3%

3.7%

18.1%

19.9%

Riverside County

$333,520

$331,710

$309,240

0.5%

7.9%

8.5%

10.3%

San Bernardino

$219,150

$215,640

$199,420

r

1.6%

9.9%

17.4%

10.6%

San Diego

$530,810

$530,650

$492,080

0.0%

7.9%

17.9%

9.3%

Ventura

$598,500

$596,890

$575,390

0.3%

4.0%

24.9%

19.7%

Central Coast

Monterey

$455,000

$510,000

$451,500

-10.8%

0.8%

-1.8%

0.5%

San Luis Obispo

$522,220

$507,440

$465,310

r

2.9%

12.2%

5.2%

6.5%

Santa Barbara

$672,410

$770,830

$633,330

-12.8%

6.2%

-8.8%

-6.7%

Santa Cruz

$757,500

$747,250

$626,500

r

1.4%

20.9%

23.9%

15.8%

Central Valley

Fresno

$217,510

$213,960

$192,880

1.7%

12.8%

6.7%

6.0%

Glenn

$153,330

$190,000

$170,000

-19.3%

-9.8%

42.9%

53.8%

Kern (Bakersfield)

$210,000

$205,000

r

$200,000

r

2.4%

5.0%

-0.6%

-7.2%

Kings County

$172,860

$190,000

$166,250

-9.0%

4.0%

44.4%

31.9%

Madera

$222,500

$198,750

$214,060

r

11.9%

3.9%

18.2%

6.6%

Merced

$204,840

$190,000

$164,550

r

7.8%

24.5%

14.9%

0.9%

Placer County

$394,570

$383,330

$375,160

2.9%

5.2%

10.8%

27.5%

Sacramento

$283,600

$282,080

$267,260

0.5%

6.1%

15.9%

9.6%

San Benito

$465,000

$474,900

$430,000

-2.1%

8.1%

2.0%

8.3%

San Joaquin

$280,870

$272,500

$251,100

3.1%

11.9%

0.0%

-0.2%

Stanislaus

$243,800

$242,170

$212,500

0.7%

14.7%

10.5%

-7.8%

Tulare

$188,460

$182,630

$172,500

3.2%

9.3%

15.3%

10.5%

Other Counties in California

Amador

$227,500

$250,000

$190,000

-9.0%

19.7%

40.6%

-2.2%

Butte County

$253,850

$233,930

$231,670

r

8.5%

9.6%

9.5%

0.0%

Calaveras

$265,000

$258,500

$239,000

2.5%

10.9%

5.6%

5.6%

Del Norte

$130,000

$139,250

$147,500

-6.6%

-11.9%

61.1%

190.0%

El Dorado County

$405,170

$393,400

$366,950

3.0%

10.4%

21.5%

10.7%

Humboldt

$256,250

$253,120

$238,460

1.2%

7.5%

-16.5%

-15.7%

Lake County

$200,000

$225,000

$158,000

-11.1%

26.6%

39.6%

12.1%

Mariposa

$245,830

$275,000

$237,500

-10.6%

3.5%

375.0%

26.7%

Mendocino

$379,170

$297,500

$300,000

27.5%

26.4%

8.2%

20.5%

Nevada

$327,500

$337,000

$339,000

-2.8%

-3.4%

42.9%

94.0%

Plumas

$200,000

$245,000

$231,500

-18.4%

-13.6%

13.3%

-15.0%

Shasta

$230,930

$223,750

$202,270

3.2%

14.2%

19.9%

23.3%

Siskiyou County

$153,330

$176,670

$150,000

-13.2%

2.2%

-18.9%

-11.8%

Sutter

$211,110

$250,000

$218,750

r

-15.6%

-3.5%

15.2%

26.7%

Tehama

$165,000

$163,330

$250,000

1.0%

-34.0%

-7.3%

90.0%

Tuolumne

$230,000

$232,140

$237,500

-0.9%

-3.2%

-3.0%

3.2%

Yolo

$376,190

$334,720

$331,250

12.4%

13.6%

35.0%

10.7%

Yuba

$206,670

$198,890

$191,670

r

3.9%

7.8%

7.5%

-7.7%

r = revised

April 2015 County Unsold Inventory and Time on Market(Regional and condo sales data not seasonally adjusted)

Sales move higher in Southern California and Central Valley, while Bay Area pauses

LOS ANGELES (Jan. 15) – California’s regional housing markets ended the year with mixed results as statewide home sales inched up from a year ago for the first time in nearly a year and a half, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 366,000 units in December, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. Sales in December were down 2.9 percent from a revised 376,890 in November but up a slight 0.6 percent from a revised 363,740 in December 2013. The negligible year-to-year increase was the first since July 2013. The statewide sales figure represents what would be the total number of homes sold during 2014 if sales maintained the December pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

For 2014 as a whole, a preliminary 383,320 single-family homes closed escrow in California, down 7.6 percent from a revised 2013 figure of 414,900.

“Home sales were down on a statewide basis, with pockets of gains in sales activity, especially in Southern California and the Central Valley, where home sales were higher than the prior month and year,” said 2015 C.A.R. President Chris Kutzkey. “Not so for the San Francisco Bay Area, which saw run-ups in sales and prices throughout the year. This market has tempered from its earlier frenzied pace mostly due to extremely tight inventory.”

Reversing a three-month decline, the median price of an existing, single-family detached California home increased 1.7 percent from November’s median price of $444,830 to $452,570 in December and was up 3.1 percent from the revised $438,790 recorded in December 2013. The statewide median home price has been higher on a year-over-year basis for more than two years, but price gains have narrowed over the past few months. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.

“2014 saw a return to a near normal housing market, with sales moving at a moderate pace and home price appreciation growing at more sustainable levels,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Home prices have stabilized over the past year, which is positive news for buyers who have been putting off their home search until prices leveled off. And with recent news of an improvement in the job market and the lowest interest rates in a year and a half, buyers may be resuming their home search.”

• Housing inventory tightened in December, with the available supply of existing, single-family detached homes for sale dropping from 4.4 months in November to 3.3 months in December. The index was 3 months in December 2013. The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate. A six- to seven-month supply is considered typical in a normal market.

• The median number of days it took to sell a single-family home lengthened in December, up from 43.9 days in November to 47.3 days in December and from 40.4 days in December 2013.

• According to C.A.R.’s newest housing market indicator measuring sales-to-list price ratio*, multiple bid offers for properties has waned, and properties are again generally selling below the list price. The statewide measure suggests that homes are selling at 97 percent of the list price, down from a ratio of 98.1 percent at the same time last year. The Bay Area is the only region where homes are selling above list prices and are generally selling about 0.6 percent more than the asking price.

• The average California price per square foot** for an existing single-family home was $210 in December 2014, a decrease of 1.3 percent from the previous month, but a 4.9 percent increase from December 2013. Price per square foot at the state level has been showing an upward trend since early 2012, and has been rising on a year-over-year basis for 35 consecutive months. It seems to have reached a plateau in recent months and has been leveling off at around $215 for existing single-family homes. San Mateo County had the highest price per square foot in December with $667/sq. ft., followed by Santa Clara ($500/sq. ft.), and Santa Cruz ($409/sq. ft.). The three counties with the lowest price per square foot in December were Siskiyou ($93/sq. ft.), Kings ($113/sq. ft.), and Merced ($114/sq. ft.).

• Mortgage rates fell again in December, with the 30-year, fixed-mortgage interest rate averaging 3.86 percent, down from 4 percent in November and down from 4.46 percent in December 2013, according to Freddie Mac. The December 2014 average 30-year fixed rate was the lowest since May 2013, just before the Federal Reserve announced its intention to taper the bond buying program. Adjustable-mortgage interest rates also dipped in December, averaging 2.40 percent, down from 2.44 percent in November and down from 2.56 percent in December 2013.

Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. The median price is where half sold for more and half sold for less; medians are more typical than average prices, which are skewed by a relatively small share of transactions at either the lower-end or the upper-end. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. Due to the low sales volume in some areas, median price changes in December exhibit unusual fluctuation. The change in median prices should not be construed as actual price changes in specific homes.

*Sales-to-list price ratio is an indicator that reflects the negotiation power of home buyers and home sellers under current market conditions. The ratio is calculated by dividing the final sales price of a property by its last list price and is expressed as a percentage. A sales-to-list ratio with 100 percent or above suggests that the property sold for more than the list price, and a ratio below 100 percent indicates that the price sold below the asking price.

**Price per square foot is a measure commonly used by real estate agents and brokers to determine how much a square foot of space a buyer will pay for a property. It is calculated as the sale price of the home divided by the number of finished square feet. C.A.R. currently tracks price-per-square foot statistics for 33 counties.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 165,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

# # #

December 2014 County Sales and Price Activity(Regional and condo sales data not seasonally adjusted)

1. Paint like a scientist. Studies show that painting rooms colors that are consistent with their purpose actually makes a home’s residents happier than they were before the paint job. Spending a weekend shifting to crisp and clean green bathrooms, soothing blue or cream bedrooms, and warm browns, golds, oranges, and reds for dining and living areas turns out to be one of the least expensive ways you can use your home to give your family an emotional boost.

2. Fix (or toss) what’s broken. If your coffee machine has been sitting on the counter for four months waiting on a trip to the repair shop, you have drawers that don’t close all the way, your dining table wobbles or your shower needs regrouting, you are incurring a little drain of energy, getting a little injection of frustration every single time you look at or try to use these items. Throw out or repair items that don’t work — stat. Just let them go.

Then, create a little inventory for home projects that need to happen, and get a handyman or the appropriate contractors on the horn and get bids so you can budget and plan for getting them done.

If someone in your home is a big do-it-yourselfer, negotiate an agreement that she will have X items fixed by Y date or you will call out a repairperson.

In any event, at least get the bids on the repairs; you might be surprised at how quickly and inexpensively they can get five or 10 little repairs done on a weekend, and your in-house do-it-yourselfer might decide that her time is more precious than the repair costs.

Same goes for situational setups that are simply not working for your life and your activities: If your office space or your kids’ rooms are overflowing with clutter, after you purge (see No. 4, below), explore the many built-in and off-the-shelf storage solutions that are affordable and can render this space much more functional.

Generally, get aggressive about setting up each of your home’s rooms to help your family optimally experience whatever purpose that room is designed for: Research how you can maximize your bedroom’s restfulness, your living room’s conversationality, your office’s efficiency, and your dining area’s coziness.

3. Trick out your trims. If you’ve ever done a soup-to-nuts remodel of your home’s exterior and/or landscaping, you know that there’s nothing like the feeling of driving up to your house at the end of the workday and simply loving the way it looks. But what if you don’t have a ton of cash to drop on a complete curb appeal overhaul? I believe one of the most underestimated ways to change the way your home looks is to focus on the trims:

•Get a new door or just paint the door and get a new knocker, handle or kickplate.

You’ll be amazed; painting a home’s front door, eaves, shutters, and trims can make the entire home look like it’s had a fresh paint job.

4. Purge. Books, papers, clothing — these things accumulate as if through their own volition, and can create clutter and claustrophobia, the feeling that you have much less space than you truly do and the feeling of being trapped under a daunting pile of stuff you rarely, if ever, use.

If you crave to purge your stuff and simply seem to never get started make a game of it. Last year, I decided to get rid of 100 things in one month. The number 100 is uber-accessible, and if you give yourself a full month to do it, that can also help you feel confident that this is a mountain you can tackle.

Although home prices are likely to continue to rise in the next few years, the national market is not in danger of a bubble, according to prominent economists. “Four of the next five years are likely to be improving years in the housing market. I don’t say five because there’s always the possibility of little hiccups in the housing market,” said Lawrence Yun, chief economist for the NATIONAL ASSOCIATION OF REALTORS®.
“But we will still be shy of the bubble years of 2005.” Yun spoke on a panel at the National Association of Real Estate Editors conference in Atlanta Friday along with Jed Kolko, chief economist for real estate search and marketing site Trulia, and Mark Fleming, chief economist for real estate data and analytics firm CoreLogic. “Right now we are not in bubble trouble, even though prices are rising as fast as we saw in last decade’s bubble,” Kolko said. Prices are still 7 percent undervalued relative to incomes and rents, he said.
By contrast, home prices were 39 percent overvalued during the housing boom with some areas overvalued by up to 80 percent, he added. Kolko said there is no sign of overbuilding and little sign of overborrowing. “Prices would have to keep rising at the current rate for several more years to put us back in bubble territory,” he said. He anticipates three factors will stem price appreciation before that happens: higher mortgage rates, fading investor interest and more for-sale inventory. Higher mortgage rates will likely dampen, but not kill, housing demand — even an increase to a 5.5 percent interest rate is still historically low, and buying would still be 33 percent cheaper than renting at that rate, he said.
Indeed, interest rates would have to rise to more than 11 percent for renting to be cheaper than buying, he said.

“Of course, it’s different for different markets,” Kolko added, and his calculations assume borrowers will stay in their homes for seven years, among other assumptions.
A recent analysis by Trulia found that prices were overvalued in nine of 100 major metros: the California metros of Orange County (overvalued by 9 percent), Los Angeles (5 percent), San Jose (3 percent) and San Francisco (2 percent); the Texas metros of Austin (7 percent), San Antonio (5 percent) and Houston (2 percent); Portland, Ore. (1 percent); and Honolulu (0.01 percent).
Rising prices and flattening single-family home rents will curb investor interest, Kolko said. That will also affect demand and therefore limit upward pressure on prices.

Low inventory has contributed to skyrocketing price appreciation, making it a necessary part of the recovery, Kolko said. But inventory will begin to rise as would-be sellers get off the fence and put their homes on the market, he said.
Rising prices have brought many homeowners from underwater, making them eligible to sell again, but negative equity is not the only factor at play in their decision.
“Prices have been rising for 15 months,” but inventory has not risen in that time, Kolko said. The reason behind that hesitance has to do with homeowner attitudes: “No one wants to sell at the bottom. Why would you sell if you could wait six months or a year?”

CoreLogic’s Fleming said home value peaks during the bubble years still loom large in homeowners’ minds.

“People have reservation prices. They are not going to bring the house on market until it gets there,” he said.

Fleming noted that the biggest problem plaguing the housing market is lack of equity. Given rapidly rising home prices, he expects the number of homeowners with negative equity will be back down to a historical norm of less than 1 percent in five to seven years.

All three economists said the housing recovery was on track. Yun said there was no danger of the economy slipping back into recession.

“Home price growth is rising very, very fast. Housing wealth is easily offsetting the impact of sequestration,” he said, referring to tax hikes made earlier this year at the federal level. Yun projects home prices for existing homes will rise 8 percent this year, followed by 5 percent next year.

He warned, however, that if price growth continues to easily outpace income growth, it will affect home affordability and run the risk of “creating haves and have-nots. The owners are smiling (and) the non-owners are frustrated that they cannot participate in” the market, he said.

Yun noted the national homeownership rate currently stands at 65 percent, down from a peak of 69 percent.

“I think it’s going to go to 63 percent possibly, before stabilizing,” he said, though he cautioned that that doesn’t mean the housing market will decline. Younger generations will pull down the average, he said.

Yun expects existing-home sales to rise 6.7 percent this year to 4.97 million before rising to 5.3 million and 5.7 million in 2014 and 2015, respectively.

“Home sales are essentially coming back to the (homebuyer) tax credit-induced sales (of 2010) even without the tax credit because of the better economy,” Yun said. But sales are still only at 71 percent of the past peak, he added.

Yun expects vacation-home sales in particular to make a “meaningful” increase this year and next, due to rising household net worth among upper-income households resulting from near-peak stock values.

New-home sales are only at 28 percent of their past peak — not because buyers don’t want them, but because builders aren’t building enough new homes, he said.

Newly constructed homes inventory is at a 50-year low and, while recovering, housing starts need to rise by 50 percent to get to their long-term average of 1.5 million per year, Yun said.

“I don’t expect that to happen,” he said, noting that historically most homes have been built by smaller companies.

But “small builders are shut out of the market. They cannot get construction loans,” Yun said.

All three economists agreed construction loans to small businesses are down and harder to get. The result will be long-term housing shortages, Yun said.

“We are frustrated the banks are not lending” when they have plenty of cash to lend, he said.

Between 2009 and 2012, the average credit score for borrowers of approved Fannie Mae- and Freddie Mac-backed home loans ranged from 760 to 770, he said, noting that a “normal” average would be 720. If standards were normal, home sales would be 15 to 20 percent higher, he said.

Fleming questioned the notion that credit standards are too tight for homebuyers, however.

“Averages are easily manipulated. It’s not about the average score. It’s about the tail: Are we giving credit to people with” low credit scores? he said.

An analysis of the spread of credit scores for those obtaining loans, rather than the average score, suggests the answer to that question is yes, Fleming said.

Compared to the late 1990s, when there was a “relatively healthy” level of credit availability, credit might be “modestly constrained,” but not too far off historical norms, he said.

Denied loan applications may have an average FICO credit score of 720, he said, but they also have a loan-to-value ratio of 88 percent.

“What are they being denied for? Lack of equity,” he said.

Fleming said he did not know if there were better measures of credit availability, other than credit score averages, currently published. He noted, however, that the number of mortgage applications actually underwritten might be one measure. The share of mortgage applications underwritten stands at 15 percent, down from around 30 percent, he said.

Still, credit isn’t tight, “we’re just making it really painful and difficult” to get a mortgage, he said, suggesting the paperwork involved was likely daunting for many borrowers.

Nonetheless, he anticipates that as interest rates rise and refinancings become a smaller share of mortgage originations, the competition for purchase loans may result in what he called “expansion of the credit box.”

As the pressure to offer more exotic loans than currently available rises, “the question will be: Have we learned our lesson in the industry?” he said.

Many lenders measure income by looking at dividends. Lenders generally want to see a regular annual amount on the tax return paid out over at least the last two years.
As far as part-time work, which some retirees decide to pursue, when the borrower applies for the loan, they need to be able to confirm that they are actually employed at that moment. Once the employment situation has been verified, lenders are likely to include the pay as income, but may still require a two-year work history.
Social Security income is always counted. Borrowers should be aware that Fannie Mae guidelines allow lenders to increase that income by 25 percent if the beneficiary isn’t paying taxes on it.
Some retirees may qualify for a mortgage loan by working with a portfolio lender who does not verify income. The downside to this option is that the interest rates and down payment requirements are higher.
Some lenders qualify income-deficient, asset-rich retirees by using a program known as asset depletion. In this situation, the lender takes a fraction of the borrower’s assets, amortizes it, and applies it as income. Source: The New York Times

15-year mortgage rate Vs. 30-year mortgage rate
There is no shortage of decisions to be made when
applying for a new mortgage loan. Consumers have
to select a lender and then decide between a fixed
or an adjustable rate, and then make the biggest
decision of all, 30 year or 15 year loan.
A 30-year mortgage financing loan has always been
the most popular for consumers purchasing a
house, but as interest rates remain at record low
levels, consumers are slowly turning to 15-year
loans because of how affordable they have grown
since 2010.
Statistics from the Mortgage Bankers Association
show that a 15-year loan accounted for 23 percent
of refinancing applications in November of last
year. This is up 51 percent from a year earlier. For
the whole year, 15-year mortgages made up 35
percent of all refinance loans. In 2007, 15-year
mortgage loans made up for only 8.5 percent of the
refinance market.
Rates are becoming extremely affordable for a 15-
year loan, so more consumers do not mind the
higher monthly payment because of amount that
they are saving in the long run. Consumers are
saving themselves in the tens of the thousands in
interest over the life of the loan vs. the life of a 30-
year loan.
The chart below illustrates the savings generated from
obtaining a 15-year mortgage vs the traditional 30-
year one. On a median priced home of $366,930, a
homeowner could save up to $117,000. Figure 1
breaks down payment and interest schedule for the
two types of loans.
The saving is the result of the historically low rates,
which are also lower for 15-year loans. While the
mortgage rates are not going to stay this low, as Frank
Nothaft, chief economist at Freddie Mac, said “a 15-
year fixed is three-quarters of a percentage point even
lower….You can lock that in and never have to worry
about refinancing again.”
There are advantages in selecting either a 15-year
mortgage or a 30-year mortgage. The main
advantages for selecting a 15-year loan are that:
consumers pay off mortgage faster, save money in
interest and build equity much faster. While these are
great advantages, more Americans find using a
traditional 30-year loan gives them the advantages of:
having a lower monthly payment and having extra
cash to increase their savings.

This is a good time to pay down your mortgage: One of the vexing features of the post-crisis financial system is the dearth of riskless investments paying a decent return. The rates on federal government securities and insured certificates of deposit (CDs) are not much greater than zero.

Yet every homeowner with a mortgage has the opportunity to earn a return equal to the interest rate on the mortgage, with no risk, simply by making extra payments. It is the best investment opportunity most homeowners have.

The only downside to using mortgage repayment as an investment is that it has no liquidity — once you make the payment you can’t take it back if you have an unexpected need for funds.

However, most homeowners with mortgages who place their savings in bank deposits or money market funds paying less than 1 percent, rather than earning 3-6 percent by paying down their mortgage, do it for reasons other than a need for liquidity. The main reason is confusion about one or another feature of loan repayment.

Confusion about loan repayment as an investment: Some borrowers have trouble viewing mortgage repayment as equivalent to buying a bond or a CD. Yet in both cases, you pay out money now and receive a stream of income in the future based on the contracted interest rate.

The only difference is that the income received from a mortgage repayment is cancellation of interest that you would have had to pay otherwise. The difference between receiving $1,000 of interest and eliminating the payment of $1,000 of interest is one of form but not of substance.

Those with a mortgage can actually earn a little more than the interest rate on their mortgage by taking advantage of the 10- to 15-day payment grace period that is found in all mortgage contracts. By adding the extra payment to the scheduled payment, the borrower will save interest for the entire month, even though he does not provide the funds until 10 or 15 days into the month.

Note: If the borrower makes a separate payment after the grace period, his loan balance may not be reduced until the following month, which would reduce his return on investment.

Confusion over deductibility: Some borrowers who itemize their tax deductions don’t want to repay their mortgage because it entails loss of a deduction. But the loss is exactly the same as that on a taxable investment. For example, a borrower in the 33 percent tax bracket who repays a 3 percent mortgage earns 2 percent after tax. If instead the borrower purchased a CD paying 1 percent, the after-tax return is 0.5 percent. If the before-tax rate on the repaid mortgage is above the before-tax rate on the alternative investment, the same will be the case after taxes.

Confusion over mortgage life cycle: Some borrowers believe that they missed the boat on loan repayment because they didn’t do it in the early years of their mortgage when the regular payment went largely to interest, whereas now most of it goes to principal. But the rate of return on mortgage investment is not affected by where the mortgage is in its life cycle. While the allocation of scheduled payments between principal and interest changes over the life of the mortgage, extra payments go entirely to principal, no matter what stage of its life cycle the mortgage is in.

Confusion over imminent sale or retirement: Some borrowers are immobilized by plans to sell the home, as if somehow this would prevent their obtaining the expected benefit from making extra payments. But it wouldn’t — in fact, the benefit would become glaringly evident in the smaller loan balance they have to pay off out of the sale proceeds.

A similar point applies to those planning to retire with reduced income. If and when they need a reverse mortgage in the future, they will have to pay off their existing mortgage in the process, and the lower the balance, the more they will be able to draw on the reverse mortgage.

Confusion over whether the lender will properly credit their account: Numerous versions have crossed my desk, including a concern that the lender won’t credit their account until the end of the term. This is not true — the account is credited immediately or even a few days early, as noted above.

A variant is that the lender will use the extra payments for some purpose other than reducing the loan balance. The only substance to this concern is that the lender will indeed apply extra payments to any unpaid obligations, of which the most likely is an underfunded tax/insurance escrow account. Aside from that, the only thing the lender can do with extra payments, other than credit them to the loan balance, is to steal them, which they never do.

With one exception, borrowers making extra payments need not provide special instructions as to how the payments should be applied. The exception applies when the extra payment is an exact multiple of the scheduled payment – the payment the borrower is obliged to make each month.

If the scheduled payment is $600 and the borrower sends in a check for $1,200, the lender does not know whether the borrower wants to apply the extra $600 to principal, or is paying for two months. To avoid this problem, do not make extra payments an exact multiple of the scheduled payment.

Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

Half of U.S. states saw an annual increase in the number of foreclosure-related filings in 2012, but most of those were judicial foreclosure states where loan servicers were catching up on the backlog from the “robo-signing” controversy, according to a year-end report by data aggregator RealtyTrac.

All told, RealtyTrac reported foreclosure-related filings against 1.84 million U.S. properties in 2012, down 3 percent from 2011 and down 36 percent from a 2010 peak of 2.9 million homes.
All but five of the 25 states seeing an increase in foreclosure-related filings (default notices, scheduled auctions and bank repossessions) were states where courts handle most foreclosure proceedings.

Many foreclosure proceedings against homeowners in those states were stalled, but not derailed, by allegations that loan servicers failed to follow proper procedures in filing legal documents.

After loan servicers reached a settlement last March with state and federal officials last over so-called “robo-signing” practices and revised their procedures, they began pushing new and existing proceedings through the system again (many also started approving more short sales to meet their obligations under the terms of the settlement).

Homes in New York took the longest to move through the foreclosure process — 1,089 days — followed by New Jersey (987 days), Florida (853 days), Hawaii (781 days), and Illinois (697 days).

In the 25 states that saw foreclosure filings drop from 2011 to 2012, 19 handle most foreclosures outside of the court system, and loan servicers in those states continued to move homes through the foreclosure process during the robo-signing controversy.

RealtyTrac warned there could be a foreclosure backlog building up some states that saw filings decline in 2012, as the result of new state legislation and court rulings that make it more difficult for lenders to foreclose.

So 2013 could see “two discrete jumps in foreclosure activity,” at the beginning and end of the year, said Realty Trac’s Daren Blomquist.

“We expect to see continued increases in judicial foreclosure states near the beginning of the year as lenders finish catching up with the backlogs in those states, and another set of increases in some non-judicial states near the end of the year as lenders adjust to the new laws and process some deferred foreclosures in those states.”

The rise in foreclosure activity in many local markets in 2012 “should translate into more foreclosure inventory available for sale in 2013 in those markets,” Blomquist said. “That is good news for buyers and investors, but could result in some short-term weakness in home prices as the often-discounted foreclosure sales weigh down overall home values” in those markets.

Among metro areas with a population of 200,000 or more, Stockton, Calif., had the nation’s highest foreclosure rate (3.98 percent). Six other California cities made RealtyTrac’s list of the 20 metro areas with the highest foreclosure rates, and Florida landed eight cities on the list, including Miami (3.71 percent) and Orlando (3.46 percent).

Zillow is projecting that a half-dozen markets in California, including some Central Valley cities hard hit by foreclosures, will see double-digit home price appreciation in the months ahead. The real estate portal’s analysis of more than 250 markets predicts that national home prices will appreciate 2.5 percent in the year ending November 2013.

“The U.S. housing market bottomed in the fourth quarter of 2011 and has since entered a sustainable recovery,” Zillow Chief Economist Stan Humphries said in a blog post.